Canadian investors take note: Warren Buffett eyes Canadian investment opportunities

Warren Buffett's past Canadian investments

"We do not feel uncomfortable [about] putting our money into Canada," Buffett stated during an arena-packed investor gathering on May 4, 2024. "In fact, we’re actually looking at one thing now."

The interest in Canadian investment opportunities comes as no surprise to those familiar with Buffett’s investment moves. The Berkshire Hathaway brand recently demonstrated confidence in the Canadian market by taking a significant position — approximately USD$300 million — in Home Capital Group. The move was seen as a vote of confidence in the Canadian mortgage underwriter.

During Berkshire Hathaway's annual shareholder meeting, often dubbed the "Woodstock for Capitalists," Buffett elaborated on his investment philosophy, emphasizing his confidence in Canada's economic stability and similarities in business operations with the United States.

"There's a lot of countries we don't understand at all," the Oracle of Omaha remarked before elaborating on his confidence in the Canadian markets: “... it's terrific when you've got a major economy, not the size of the U.S., but a major economy that you feel confident about operating there."

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Unclear where Warren Buffet plans to invest

While Buffett did not disclose specific details about the potential Canadian investment target, he hinted at Berkshire's ability to contribute positively to the national market.

"Obviously, there aren't as many big companies up there as there are in the United States," Buffett noted. "There are things we actually can do fairly well that Canada could benefit from Berkshire’s participation."

5 key considerations for Canadian investors

For Canadian investors, Buffett's interest in the Canadian market presents an opportunity to strategize their portfolios. Here are five key considerations for Canadian investors:

Focus on diversification

Following Buffett's lead in exploring the Canadian market can serve as a strategy for diversification. Investors can consider allocating a portion of their portfolio to Canadian companies that align with Berkshire Hathaway's investment principles.

For instance, Buffett consistently champions index funds. Here, investors can get comfortable with picking stocks while still cashing in on market gains by owning shares of a fund that follows overall market trends. For Canadian investors, good options include:

• Vanguard Canadian Short-Term Corp Bond IDX ETF (TSX:VSC)
• Vanguard Canada Inc S&P 500 Index EFT (TSX:VFV)
• Vanguard S&P 500 ETF (VOO)
• Vanguard FTSE All Cap Index ETF (TSX:VCN)
• iShares Core S&P 500 ETF (TSX:IVV)
• SPDR S&P 500 ETF Trust (TSX:SPY)
• Vanguard Total Stock Market ETF (TSX:VTI)

Where to buy index funds

You can purchase an index fund directly from a mutual fund company or through a bank investing firm, but these options usually come with higher fees. Another option is to use an online discount brokerage or trading platform. A discount brokerage may not carry as many index mutual fund options, but it will provide hundreds of lower-cost ETFs.

Good options include:

• CIBC Investor’s Edge: Get 100 free trades and up to $4,500 cash back when you open and fund a new investment account
• Questrade: Get a $50 trade commission rebate
• Wealthsimple Trading: Get $25 and commission free trades when you open and transfer $150 or more into the trading account

For anyone interested in investing on autopilot, check out Wealthsimple’s auto-invest account. Open a new account and deposit $500 or more and get $25 in cash back.

Research potential targets: Both companies and sectors

Keep an eye on Canadian companies across various sectors that might attract Berkshire's attention. Conduct thorough research on their financial health, management team and growth prospects to identify potential investment opportunities.

One sector that attracted the attention — and investment dollars — of Buffett and the Berkshire Hathaway team is real estate. In the last half decade the Berkshire team has invested hundreds of millions into various mortgage lenders and real property management firms located in America and Canada. For Canadian investors, a good option for both real estate investing exposure as well as diversification is real estate investment funds (REITs).

For investors seeking exposure to REITs, one good option is the S&P/TSX Capped REIT (SPTSRE:IND). This index fund is specifically designed to track the performance of REITs and, as of early May 2024, trades around $150 per share. For Canadian investors looking to pick and choose the types of real property they invest in, here are seven REITs listed on the Toronto Stock Exchange (TSX) to consider:

• Allied Properties REIT (AP-UN.TO): Urban office space with holdings in Canada's largest cities. Approximate price per share: $17.35
• Boardwalk REIT (BEI-UN.TO): Multi-family rental communities with holdings from across Canada. Approximate price per share: $72.35
• Can Apartment Prop REIT (CAR-UN.TO): Focuses on residential apartment buildings that include apartments, townhomes and manufactured community sites. Holdings across Canada and the Netherlands. Approximate price per share: $45.30
• Choice Properties REIT (CHP-UN.TO): Focus on work/live communities across Canada. Approximate price per share: $13.15
• Colliers International GR-SUB (CIGI:CT): Focus on providing commercial real estate and investment management to corporate and institutional clients in North America, Europe, the Middle East, Africa and the Asia Pacific. Approximate price per share: $150.00
• Crombie REIT (CRR-UN.TO): Focuses on grocery-anchored retail, mixed-use developments and retail related to industrial use. Approximate price per share: $12.80
• CT REIT (CRT-UN.TO): Closed-end fund with a focus on income-producing commercial properties across Canada. Approximate price per share: $13.80

Investing in REITs is similar to investing in stocks, since you can buy and sell shares through a brokerage platform. For more on picking the right trading app or discount brokerage platform, read the Money guide on the investment trading platforms in Canada.

Stick to Buffett's philosophy and invest for the long term

Buffett is known for his long-term investment approach. Canadian investors can emulate this strategy by focusing on companies with strong fundamentals and competitive advantages, aiming for sustainable growth over time.

Stay informed

Stay updated on Berkshire Hathaway's moves and Buffett's insights into the Canadian market. Monitor news and industry developments to make informed decisions about investment opportunities.

Ask professionals

Consider seeking advice from financial advisors or professionals with expertise in both the U.S. and Canadian markets. They can provide valuable insights and guidance tailored to individual investment goals and risk tolerance.

Bottom line

Main street investors can learn from industry icons, such as Warren Buffett, without replicating the exact trade or position the long-term value investor takes in a particular company or sector. By reviewing Buffett's trades and finding synergy in similar strategies — for instance, taking a buy-and-hold position in REIT — investors can benefit from the Oracle's ongoing insight.

If Canada's S&P/TSX Composite Index continues its upward trajectory, driven by robust financial and commodity industries, then Canadian investors who strategically positioned themselves in alignment with Buffett's investment vision for the Canadian market will more than likely experience the benefits. Always keep in mind, though, that past performance does not guarantee future earnings.